2014 Local Real Estate Market Report and Trends In Bay Area Mid- Penninsula

 The local housing market experienced another year of exceptional strength in 2013. The Bay Area saw stellar growth with IPOs and buyouts creating a new wave of millionaires and the influx of money from venture capital firms into the local businesses added a big boost to the local economy.

Low mortgage rates and job stability continue to motivate buyers. Although mortgage rates increased this year, they’re still very affordable when compared to historical rates. A broad mix of buyers produced a huge demand in 2013. As interest rates and house prices started to rise, some buyers who had stayed on the sidelines as well as renters decided to join the bidding frenzy and fueled demand. In addition we saw a considerable number of foreign cash investors from China and India entering the market, As a result, most homes saw multiple offers with cash buyers dominating the winning bids.

 Scarce inventories added to the bidding frenzy. Cash buyers, unimpeded by a lender-imposed requirement that the property appraise, frequently paid above market value, pushing up prices. 

 
Inventory is at a record low. At the end of 2013 the listing inventory consisted of 6 active listings in Palo Alto, 16 in Menlo Park, 25 in Atherton, 10 in Portola Valley, 19 in Woodside and 8 in Los Altos. The low inventory signals a strong market for 2014.

Palo Alto and Menlo Park:

 
There were 396 single-family home sales in Palo Alto in 2013 (compared to 472 in 2012) and 336 sales in Menlo Park (compared to 391 in 2012).

The median single family home price increased 22% in Palo Alto (to $2,100,000 in 2013 from $1,727,000 in 2012), and 12% in Menlo Park (to $1,510,000 in 2013 from $1,325,000 in 2012).

In Palo Alto, the sale to list price ratio was 104% and the average days on the market was 24 days, In Menlo Park the sale to list price ratio was 103% and the average days on the market was 24 days.

The townhouse/condominium market was also strong in 2013. 106 units sold in Palo Alto, with the median sale price increasing 7% to $950,000 (from $890,000 in 2012). 91 units sold in Menlo Park with a median price of $845,000, a decrease of 5 % from $892,000 in 2012.

 Following are charts showing price per square foot by areas:

 

Price per square foot by area in Palo Alto 

 

 

 

 

Price per square foot by area in Menlo Park

 

 

 

Atherton and Portola Valley:

There were 97 sales in Atherton in 2013 (compared to 84 in 2012) with a median price increase of 12 % in Atherton (to $3,575,000 in 2013 from $3,200,000 in 2012).

The sale to list price ratio in Atherton was 100.5 % and the average days on the market was 65 days.

 

In Portola Valley there were 78 sales in 2013 (compared to 77 in 2012). The median sale price increased 3% in Portola Valley (to $2,268,000 in 2012 from $2,200,000 in 2011). The sale to list price ratio in Portola Valley was 95% and the average days on the market was 48 days.

 

Following are charts showing price per square foot by areas:

 

Price per square foot by area in Atherton 

 

 

                          

 

 

Price per square foot by area in Portola Valley 

 

 

 

Woodside and Los Altos:

There were 110 sales in Woodside 2013 (compared to 92 in 2012) with a medium price increase of +28 % in Woodside $2,052,000 in 2013 (compared to $1,605,000 in 2012) and the average day on the market was 61 days ( compared to 86 days in 2012).

The sale to list price ratio in Woodside was 98.9 % and the average day on the market was 65 days.

 In Los Altos there were 321 sales in 2013 (compared to 364 in 2012). The median sale price increased 15% in Los Altos ($2,100,000 in 2013 compared to $1,826,000 in 2012). The sale to list price ratio in Los Altos was 106.9 % and the average days on the market were 22 days.

 Following are charts showing price per square foot by areas:

                        

Price per square foot by area in Woodside  

 

                       

 

Price per square foot by area in Los Altos

 

 

 

Looking forward:

 Economists and market observers have suggested that the market is poised for continued growth as the economic recovery enters its fourth year, and there are positive elements in play that provide some reasons for optimism and dispel the worry about a bubble market.

 Interest rates are extremely low, which keeps mortgage payments low and affordable. In many instances, it is cheaper to buy a new home than it is to rent.

 Unemployment is inching down.

 Buyers are investing more into the purchase of a new property than in the past by putting down more than the minimum required. The zero-percent down payment programs of the past made it easier for homeowners to walk away from properties. Higher down payments suggest that buyers are in for the long haul and don’t intend to make the same mistakes the second time around.

 

Aside from affordability, ongoing headwinds include limited inventory conditions and stringent mortgage standards, both of which are expected to continue.

Demand from buyers will continue to be strong as long as the economy is creating jobs that pay well enough to buy at today's prices.

The factors noted above make a lot of people want to jump into the housing market and perhaps they should. Real estate has always been a great way to build wealth and financial stability.

 

But despite the market euphoria, make sure to complete the necessary detailed analysis before you decide how much to bid on that house or whether to bid at all.

As interest rates rise to their traditional levels, generally between 5% and 7%, you can expect either prices to stabilize or sales volumes to decline. Ominously, the Mortgage Bankers Association noted a decline of more than 70% in refinance-loan applications since rates began rising in May and about a 15% falloff of purchase-loan applications.

Our local housing market will continue to be strong in 2013, reflecting the continuing economic recovery and the pace of IPOs and the increase in hiring that should continue through the year. The pace of home price appreciation will slow in the new year, but rising prices, combined with rising mortgage rates, will take a toll on affordability. I project a 10% increase in home prices this year.

 For sellers, there is no better time to sell your home. For buyers, if you have a stable income, it is good time to buy before further increases in interest rates and house prices occur.

 

Please contact me to discuss your any real estate needs and any questions you have about the local real estate market.